FINTECH BRIEFING: Europe’s fintech funding boom — BBVA ramps up open API platform — UK regulatory bodies push competition
EUROPE’S FINTECH FUNDING BOOM. The UK took £647.5 million ($901 million) of the £8.9 billion ($12.5 billion) that was invested in fintech globally last year, according to data gathered by Pitchfork on behalf of Innovate Finance. Five other European countries combined took £790 million ($1.1 billion).
- Two of the top 20 global fintech deals were from the UK.Challenger bank Atom raised £90 million ($125 million) and peer-to-peer lending platform Funding Circle raised £97 million ($150 million). Three other UK fintechs, all specialising in money transfers and FX, raised over £36 million ($50 million) each. These five deals highlight the three biggest verticals in UK fintech at the moment which together made up 74% of investment volume.
- Germany is becoming a major player. The Innovate Finance report revealed Germany received €751 million ($825 million) in fintech investment in 2015, second only to the UK in Europe. Over half of this investment has been in credit and lending fintech, and there is a growing focus on B2B fintech in the country, according toEY. Long seen as a conservative bastion of Europe when it comes to finance and regulation, it looks like Germany will be the first country where fintech is driven by corporate, rather than consumer, demand. There is also no obvious centre for fintech in Germany – as London is for the UK – so it would be wise to keep an eye on both Frankfurt and Berlin.
- Fintech funding by financial institutions is growing. 25 fintech-related deals had investment from corporate VCs last year, also according to Innovate Finance’s report. The interest among incumbents in the banking industry towards investment in fintechs is a key indicator that they have accepted they cannot compete with fintech startups solely with in-house innovation.
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BBVA RAMPS UP OPEN API PLATFORM. The Spanish bank has created the position Head of Open APIs and rehired a Simple executive to fill it. Shamir Karkal was CFO and co-founder of Simple, the digital-only bank BBVA acquired in 2014, and his first responsibility in his new role will be to build BBVA’s Open API platform.
- BBVA is ahead of the game. The European legislation known as PSD2, which will confirm the introduction of the much talked about XS2A provision, requiring banks to open up their data to third parties through APIs, is due to become law in 2018. Banks will therefore have to build APIs to the prescribed standard by that date. Some banks are aiming to simply do the minimum to obey the law, but in building its Open API platform BBVA is actively embracing the opportunity it sees PSD2 presenting.
- Bank/startup collaboration is the key message. BBVA will begin by inviting a few selected partners in Spain into a closed Alpha to help with the development of the platform. This gives the partners, who will likely be in areas such as biometrics, P2P, and personal finance management, access to BBVA’s huge resources, and BBVA access to innovative ideas and talent. It all adds further weight to the idea that the way forward in financial services is collaboration between new entrants and incumbents.
- The benefits of APIs are yet to be confirmed. BBVA is working on the principle that by building its platform alongside third parties it will avoid being disintermediated by those third parties in the future. There is no clear guidance from the EU on whether banks will be able to charge third parties for access to their APIs at present, meaning big banks currently building APIs and partnerships are doing so without knowing whether it could eventually provide direct revenue or a strong business opportunity.
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